Find out how your income might affect your Medicare premiums.
Your income could affect your Medicare Premiums. Let's start with a high level overview of Medicare, and then discuss how your income can have an impact on your health care coverage costs.
Enrolling in Original Medicare (usually when you turn 65 or retire) enables you to obtain Part A and Part B health care coverage from the Centers for Medicare & Medicaid Services, or CMS. CMS is a branch of the Federal Government. Part A is your hospital coverage, as well as skilled nursing care and hospice care. Part B is your outpatient or medical coverage, and includes care by your physician, some preventative services, and medical supplies.
Many Medicare beneficiaries choose to add to their Original Medicare coverage by purchasing a Medicare Supplement policy (often called "Medigap") or enrolling in a Medicare Advantage Plan (also called and MAPD plan, or "Medicare Part C".) However, even if you do purchase a Medigap policy or enroll in an MAPD plan, you are required to first enroll in Original Medicare.
Notably, most Medicare beneficiaries pay no monthly premium for Part A. And most Medicare beneficiaries pay a standard amount for their Part B premium. For 2024, the standard Part B premium is $174.70, and that amount is adjusted annually by CMS. There are exceptions to what you might pay as a monthly premium for both Part A and part B premiums, based on your individual circumstances.
Part A Premiums. Part A is premium free whenever you are either receiving or eligible for retirement benefits from social security, and as such the vast majority of beneficiaries receive Part A without a premium. If you're under 65, you can get premium-free Part A if you have been receiving social security disability benefits for 24 months. If you aren't eligible for premium free Part A, you can purchase it for a premium of either $278 or $505 (in 2024) with the amount determined by the length of time that you or your spouse worked and paid Medicare taxes through Social Security.
Part B Premiums. Each year, CMS sets a standard monthly premium amount for Part B coverage. For 2024, that amount is $174.70. There are, however, certain circumstances that you may encounter where you will pay more for your Part B premium:
1) You have incurred a Part B Penalty. If you didn't get Part B when you're first eligible, your monthly premium may go up 10% for each 12-month period you could've had Part B, but didn't sign up. Note that there are instances where you can delay your Part B enrollment without penalty (for example, if you are going to continue to work past age 65 and have other health coverage that CMS deems at least as good as what Medicare would provide; also called "creditable coverage.") But if you don't have creditable coverage and you delay your Part B enrollment, you'll have to pay the penalty each time you pay your premiums, for as long as you have Part B. And, the penalty increases the longer you go without Part B coverage.
2) You are subject to an adjustment to your premium based on your income. If your modified adjusted gross income (as reported on your IRS tax return from 2 years ago) is above a certain amount, you'll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium. For 2024, the IRMAA thresholds can be seen in the chart below:
Important note: Remember that your IRMAA premium is based on your income two years ago. It is likely that you are enrolling in Medicare because you have decided to retire, and if that is the case, your income is very likely going to decrease. If this decrease places you somewhere else on the chart, you can file an appeal. You can also appeal if a different type of circumstance has affected your income over the past two years or will affect it moving forward, such as the death of a spouse, loss of a pension, or a reduction or loss of any significant source of income not related to your job. Be sure to follow the appropriate process if do decide to appeal (which will be outlined in the notice your receive initially notifying you of your IRMAA status.)
Finally, if you have limited income and few assets, you may qualify for one of Minnesota's Medicare Savings Programs. If you do qualify, you may be eligible to get help paying all or part of your Part B premium. There are several programs with various qualifying criteria. To find out if you qualify and get help applying, contact the Minnesota Health Care Programs Help Desk.
In conclusion: Most of the time you can expect to pay a $0 premium for your Part A coverage and a standard premium for your Part B. However, in order to avoid paying higher Part B rates you might find it helpful to talk to a licensed, independent insurance agent who specializes in Medicare. We can be helpful in helping you avoid Part B penalties, and in assessing your IRMAA situation. We can also help you determine if you are eligible for income-based assistance with paying your premiums. Best of all, our services are offered at no cost to you. Reach out today!